What’s one of the number one triggers for buying life insurance?
When you have a kid, you have a whole new set of priorities – and expenses. You have all of the extra costs of clothing and feeding her, plus childcare expenses (daycare is pricey these days!) and, eventually, college. And that’s not even counting things like needing a bigger house or car, and the payments that come along with those.
That’s why it’s so important to make sure your family is protected with life insurance.
Pregnancy, life insurance, and you
Getting life insurance when you’re pregnant is mostly the same as getting it when you aren’t. But you’re on a bit of a tighter timeline when you’re pregnant, because the insurance application process is a lot shorter than 9 months.
If you know you’re pregnant or you’re trying to get pregnant, buy life insurance as soon as possible. Buying in your first trimester can save you a ton of money in the long run.
This is because a woman’s body goes through a lot of changes during pregnancy. (I know! What a revelation.) Women gain weight when they’re carrying around another human being inside of them, and weight has a big impact on your life insurance rates.
Then there are other health issues that could result in increased premiums. Many pregnant women can suffer from gestational diabetes, a form of diabetes that is pregnancy-related and usually goes away after the pregnancy; high blood pressure; and raised cholesterol levels. Even though these health conditions may resolve themselves after you give birth, the insurance company has to consider your present health state when determining your risk, so they'll definitely make an impact on your final rating.
So you definitely need life insurance when you’re pregnant, and you need to get it early. But life insurance policies aren’t necessarily one size fits all. You can use riders to customize your policy, providing additional coverage or special terms.
If you’ve got a little one on the way, consider these riders to get the most out of your life insurance policies.
If you want a full rundown on child riders, we have a great write up here. In short, though, here’s what you need to know.
Child riders let you provide life insurance protection in the event that anything happens to your children. Considering funeral costs can top $8,000, the loss of a child can be devastating financially as well as emotionally. Child riders can help take one of those hardships off of your hands.
A child rider essentially allows you to purchase life insurance for your children in "units" of $1,000 at an average annual price of $5-7 per unit. So if you wanted $10,000 worth of protection, that could add $50 to the annual cost of your life insurance policy, or around $4.17 to your monthly premium.
Most child riders are eligible to start when your child is around two weeks old and the term ends when they turn 18 (although some can last until your child is 22 or 25). Best of all, a single rider can cover all of the children in your household.
There are some pros and cons to child riders. On the one hand, it can help pay for funeral expenses and is typically a much better deal than buying a separate policy for your child, which is usually an expensive, unnecessary whole life insurance policy.
On the other hand, life insurance isn’t really needed for children in general. Life insurance is typically used as income replacement when the primary breadwinner dies which, obviously, doesn’t apply to your kids. In a lot of cases it’s just an extra cost.
Disability income riders
Life insurance is income replacement for when you die. But what about when you need income replacement because you’re just injured? You’ll still need money coming in to pay for your child’s needed until you get better.
That’s where long-term disability insurance comes in. You can buy long-term disability as a separate policy from life insurance, and we recommend it for most people. But if you can't afford it right now, then at least a disability income rider can help.
With a disability income rider, you’re killing two birds with one stone: you’re buying a life insurance policy with disability insurance added on. Here’s what a typical disability income rider entails:
"Can provide a regular monthly benefit up to 2 years to the primary insured if they are unable to work due to a covered illness or injury. The definition of disability is ‘own occupation’ for the first 12 months and ‘any occupation’ after the first 12 months. Premiums for the Term Policy and all riders are waived while your client is receiving disability benefits."
Long-term disability insurance is important because one in four workers will become disabled before they retire. A standalone long-term disability policy is usually your best bet in terms of the amount of coverage you can get – a good policy will get you close to your take-home pay – but a disability income rider can add a little extra protection to that life insurance policy you’re buying anyway.
If you have a baby on the way, there’s a good chance you have a significant other in the picture. If that’s the case, consider a spousal rider to offer him or her protection, too.
A joint life insurance policy is a possibility, but it’s not really the best option because of the expense (it’s usually a permanent policy, so it costs more than term life insurance) and it can get confusing when you get into the difference between first-to-die and second-to-die policies and what to do if there’s a divorce.
Buying a separate term life insurance policy for your spouse is usually the wiser choice, but the alternative is including him or her as a rider on your own policy – as long as you make sure you know exactly what the rider is adding. For example, some will let you add an additional level term policy to your own policy that will expire when yours does. Others, like New York Life’s Spouse’s Paid-Up Insurance Purchase Option, offers "the right to purchase a new paid-up life insurance policy on his or her life, without providing evidence of insurability" but only in the case of the policyholder dying first.
Before you settle on any riders, there are a couple things you should do.
First, consider your financial needs. Buying more life insurance than you need is a waste of money and could be better put toward, say, building a six-month emergency fund and then growing your retirement savings.
Then consider the cost of riders. Some may be included in your policy at no extra cost, but others will increase your premium. Think about what you really need. A child rider might be nice peace of mind, but realistically there’s a high likelihood you won’t need it. If your child is born with a disease or some other condition it might make sense, but otherwise you can put that $50 a year to better use.
Finally, consider alternatives. For example, an actual long-term disability insurance policy may be more expensive than a rider, but it’ll provide better coverage. The same goes with a spousal rider – it might make more sense for your spouse to have his or her own life insurance policy than being a rider on yours.
Make sure you know all of the costs and options available to you when you’re deciding which, if any, life insurance riders are important for your pregnancy. A little planning can give a lot of protection when you’re filling out your family.